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Project management, Reducing Project Duration (Copy)
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Reducing Project Duration
CHAPTER NINE
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
9–2
Where We Are NowWhere We Are Now
9–3
Rationale for Reducing Project DurationRationale for Reducing Project Duration
• Time Is Money: Cost-Time Tradeoffs–Reducing the time of a critical activity usually incurs
additional direct costs.•Cost-time solutions focus on reducing (crashing)
activities on the critical path to shorten overall duration of the project.
–Reasons for imposed project duration dates:•Time-to-market pressures•Unforeseen delays•Incentive contracts (bonuses for early completion)•Imposed deadlines and contract commitments•Overhead and public goodwill costs•Pressure to move resources to other projects
9–4
Options for Accelerating Project CompletionOptions for Accelerating Project Completion
• Resources Not Constrained–Adding resources–Outsourcing project
work–Scheduling overtime–Establishing a core
project team–Do it twice—fast and
then correctly
• Resources Constrained–Fast-tracking–Critical-chain–Reducing project scope–Compromise quality
9–5
Explanation of Project CostsExplanation of Project Costs
• Project Indirect Costs–Costs that cannot be associated with any particular
work package or project activity.•Supervision, administration, consultants, and interest
–Costs that vary (increase) with time.•Reducing project time directly reduces indirect costs.
• Project Direct Costs–Normal costs that can be assigned directly to
a specific work package or project activity.•Labor, materials, equipment, and subcontractors
–Crashing activities increases direct costs.
9–6
Reducing Project Duration Reducing Project Duration to Reduce Project Costto Reduce Project Cost
Compute total costs for specific durations and Compute total costs for specific durations and compare to benefits of reducing project time.compare to benefits of reducing project time.
Search critical activities for lowest direct-cost Search critical activities for lowest direct-cost activities to shorten project duration.activities to shorten project duration.
Identifying direct costs to reduce project timeIdentifying direct costs to reduce project time
Gather information about direct and indirect Gather information about direct and indirect costs of specific project durations. costs of specific project durations.
9–7
Project CostProject Cost–Duration Graph–Duration Graph
FIGURE 9.1
9–8
Constructing a Project CostConstructing a Project Cost–Duration Graph–Duration Graph
• Find total direct costs for selected project durations.
• Find total indirect costs for selected project durations.
• Sum direct and indirect costs for these selected project durations.
• Compare additional cost alternatives for benefits.
9–9
Constructing a Project CostConstructing a Project Cost––Duration Graph Duration Graph
• Determining Activities to Shorten–Shorten the activities with the smallest increase
in cost per unit of time.
–Assumptions:•The cost relationship is linear.•Normal time assumes low-cost, efficient
methods to complete the activity.•Crash time represents a limit—the greatest time
reduction possible under realistic conditions.•Slope represents a constant cost per unit of
time.•All accelerations must occur within the normal
and crash times.
9–10
Activity GraphActivity Graph
FIGURE 9.2
9–11
CostCost–Duration Trade-off Example–Duration Trade-off Example
FIGURE 9.3
9–12
CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)
FIGURE 9.3 (cont’d)
9–13
CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)
FIGURE 9.4
9–14
CostCost–Duration Trade-off Example (cont’d)–Duration Trade-off Example (cont’d)
FIGURE 9.4 (cont’d)
9–15
Summary Costs by DurationSummary Costs by Duration
FIGURE 9.5
9–16
Project CostProject Cost–Duration Graph–Duration Graph
FIGURE 9.6
9–17
Practical ConsiderationsPractical Considerations
• Using the Project Cost–Duration Graph
• Crash Times
• Linearity Assumption
• Choice of Activities to Crash Revisited
• Time Reduction Decisions and Sensitivity
9–18
What if Cost, Not Time Is the Issue?What if Cost, Not Time Is the Issue?
• Commonly Used Options for Cutting Costs–Reduce project scope
–Have owner take on more responsibility
–Outsourcing project activities or even the entire project
–Brainstorming cost savings options
9–19
Key TermsKey Terms
CrashingCrash pointCrash timeDirect costsFast-trackingIndirect costsOutsourcingProject cost–duration graph
9–20
Project Priority Matrix: Whitbread ProjectProject Priority Matrix: Whitbread Project
FIGURE 9.6